Rupee Weakens Toward Record Low Near 96.72 Against US Dollar Despite RBI Rate Hike

The Indian rupee faced intense depreciation pressure against the US dollar, trading around 96.72 and remaining within striking distance of its all-time record low near 97.00, despite emergency tightening measures from the central bank.

The currency's slide follows a volatile trading stretch where the pair touched intraday highs of 96.85 to 96.88 against the greenback. Persistent macroeconomic headwinds—led by elevated crude oil import costs, massive capital outflows from foreign institutional investors (FIIs), and a resilient US dollar—have largely overshadowed monetary tightening efforts.

RBI Shifts Stance to Calibrated Tightening

The Reserve Bank of India's (RBI) Monetary Policy Committee (MPC) unanimously voted to raise the policy repo rate by 25 basis points to 5.50%, marking its first interest rate hike in four years. Alongside the hike, the MPC shifted its stance to "calibrated tightening," effectively signalling that rate cuts are off the table in the near term.

According to economists, the central bank’s decision was aimed at addressing external inflation drivers and narrowing yield differentials. However, rate increases have so far provided limited respite to the rupee amid aggressive global demand for the dollar and sustained geopolitical risks.

Key Pressure Points Behind Rupee Weakness

Crude Oil and Foreign Outflows:

• Elevated Crude Oil Prices: Brent crude surged toward $106 per barrel before easing back toward $102.95 per barrel after comments from US President Donald Trump indicating the US would refrain from military strikes against Iran ahead of upcoming midterm elections. High energy costs directly inflate India’s import bill and ramp up domestic demand for greenbacks.
• Intense Institutional Selling: Foreign Institutional Investors offloaded Indian equities worth ₹12,943.58 crore on a net basis in a single trading session, creating sustained selling pressure in foreign exchange markets.
• Persistent Dollar Strength: Elevated US Treasury yields and expectations of tighter global monetary conditions have continued to funnel capital toward dollar-denominated assets, keeping the US Dollar Index firm around 102.09.

Central Bank Market Intervention

To stem an uncontrolled rout toward the critical 97.00 mark, the Reserve Bank of India stepped into the spot and forward foreign exchange markets, with currency traders reporting dollar sales by state-run banks near market opens.

Analysts note that while central bank interventions have prevented extreme volatility and speculative spikes, the underlying trajectory for the rupee remains vulnerable to international crude dynamics and foreign portfolio movements. Near-term resistance for the USD/INR pair is pegged around the 97.00 zone, with support seen along the 95.30–96.00 range.

Tags: Reserve Bank of India USD/INR Crude Oil FII NSE Nifty 50 BSE Sensex